Public Sector Undertakings (PSUs) are increasingly being called out for fueling a controversial trend in media pitches – reverse auctions. As advertising agencies grapple with this growing challenge, industry insiders are pushing for ethical reforms to curb what many see as an exploitative practice.
Reverse auctions flip the traditional pitch model on its head: instead of competing on strategy and creativity, agencies are forced into a downward spiral of undercutting each other on price. The goal? Drive rates lower and lower – often at the cost of value, quality, and fairness.
Leading industry bodies like the Advertising Agencies Association of India (AAAI) and the Indian Society of Advertisers (ISA) are stepping in. Together, they’re working on a framework to establish ethical standards and address these troubling tactics that are slowly becoming the norm.
“This practice is wreaking havoc,” said a senior executive at a media agency and member of the AAAI. “Brands kick off a pitch process, take one agency’s bid, then shop around to get a cheaper deal from another. It becomes a race to the bottom. It’s not just unethical – it’s exploitative.”
He added that the problem is particularly rampant among PSUs. “We’re seeing a rise in brands openly sharing price quotes from one agency with another, simply to force lower bids. It’s like playing poker with your cards face up.”
Industry experts suggest PSUs contribute around 5-7% of India’s total AdEx which is approximately over Rs 7,500 crore. Some of the leading advertisers from PSUs include Life Insurance Corporation (LIC), State Bank of India (SBI), Oil and Natural Gas Corporation (ONGC), National Thermal Power Corporation (NTPC), Indian Oil Corporation (IOCL), Bharat Sanchar Nigam Limited (BSNL) and Gas Authority of India Limited (GAIL).
Rahul Vengalil, CEO and co-founder of tgthr, traces the roots of this issue back to the early 2010s. “Back then, the industry coined the term ‘Mediapalooza,’” he recalled. “It was a time when media agencies were chasing client efficiency, slashing commissions just to win accounts. That trend never really died. Agencies still cut prices to the bone just to stay in the game.”
But the ripple effects are significant. “When you keep reducing margins, there’s a toll on people, quality, and creativity,” Vengalil said. “In recent years, we’ve seen clients take parts of their digital business in-house, long-standing agency relationships have crumbled, and global factors – like the wars in Ukraine and Israel or media network consolidations – have only added to the uncertainty.”
Vengalil admits to personally losing clients because he refused to drop his commission rates below a certain point. “Some agencies play the long game and try to prove their value; others chase short-term wins with big discounts. But often, procurement teams, who have the final say, only look at the cost, not the strategy.”
Meenakshi Menon, Founder of GenSxty Tribe Pvt Ltd and former executive at Carat India, APAC, Zee TV, and Lintas India, said, “Public Sector Unit led brands are driven to buy cheap media. These PSU brands need to follow the auction process so that they can stay away from any allegations of favoritism. So it suits them. This means that they also end up rigging the bidding process.”
Menon said, “When such reverse auction process takes place, media agencies end up actually buying cheap media, which may not necessarily deliver the impact. PSU brands end up sharing the lowest bids with other agencies and negotiate to get the cheapest rate.”
She added that some volume-driven agencies still chase these PSU retainers because they can turn a profit at scale. But others are opting out entirely, choosing to walk away from pitches that prioritize price over performance.
Sources told Storyboard18 that AAAI and ISA have already held multiple meetings to discuss the reverse auction problem and other unethical industry practices. Both organizations are likely to release guidelines this year and are optimistic about implementing them in a collaborative manner.
Industry veterans suggest that media retainers and commission frameworks must be standardized, urging industry bodies to take a more proactive role in advocating for change. They emphasize that advertising agencies are far more than service providers, they are strategic partners in shaping brands’ creative and communication strategies.
Experts cite that if brands continue to prioritize cost-cutting over value, they risk compromising creativity, strategic insights, and long-term growth and success. The introduction of pitch fees and standardized media retainers, as seen in other markets, could offer a structured approach to tackling these issues.
Industry leaders assert that greater transparency, standardized processes, and fair compensation are essential to nurturing long-term, sustainable relationships between agencies and their clients.